Not for Tesco a slow and painful Sainsbury-style advent into convenience beset by planning battles and distribution problems. Instead it is grabbing a 5% slice of the convenience market in one go. All it needs is T&S’s shareholders to rubberstamp the 862-store deal, and to find a buyer for non-core Dillons and Supercigs CTNs.

Then it can get on with its plans to convert 450 prime sites to its lucrative Express format over the next three to four years. The masterplan is to use T&S’s distribution network to serve the new standalone Express chain and around 400 residual One Stop and Day and Nite stores.

Analyst Dave Stoddart of Teather & Greenwood, says: “It’s not just about getting the estate, it’s about distribution expertise. Tesco will be learning new skills from a stable base. Sainsbury is running hell for leather to get its back office operations into a competitive space - maybe that’s one reason why it didn’t go for T&S.”

Analysts suggest Tesco might need the 400 stores it is not converting for critical mass. It will be overseeing their range and merchandising, although there will be no Tesco own label in those stores, and they will be run by separate management.

Association of Convenience Stores public affairs and communications manager James Lowman says small store distribution won’t be the only learning curve. “This is the first time Tesco has got into genuine neighbourhood retailing, it will be very interesting to see if it can adapt to a new set of challenges including crime, antisocial behaviour and staffing.”

But Tesco deputy chairman David Reid says Tesco has done its homework: “We now have over 100 Express forecourts which has given us an insight into the convenience market. They take excellent amounts of money. Customers’ changing lifestyles mean there is a growing demand for convenience. That is what makes this deal so attractive.”

Analyst Nick Jones of Goldman Sachs agrees it’s a good deal for Tesco, but only if it can bridge a gap in sales densities and profitability with its buying power.
That is part of the plan, and is good news for suppliers, claims Reid: “This will create opportunities for all Tesco suppliers and T&S suppliers. New suppliers will be able to get access to the Tesco main chain.”

However T&S suppliers contacted by The Grocer were expecting Tesco to want to discuss new and more favourable terms.

Richard Hull, UK retail and distribution leader consumer products at Cap Gemini, concludes: “It’s a big land grab for Tesco. This is the first stage of consolidation in the retail sector. Sainsbury and others will have to respond.”